The expiration date for temporarily higher loan limits ends early for Well Fargo.
Current conforming loan limits were raised temporarily and were due to end on October 1st. After Monday August 15th Wells Fargo will not accept applications in anticipation of the October date.
A Wells Fargo spokesman confirms, “August 15th was the deadline for applications and rate locks for FHA and conventional conforming loans with balances above the limits we expect will be in place after September 30th.”
In case you are unaware, a conforming loan is a mortgage loan that meets government-sponsored enterprises (GSE) guidelines. The Office of Federal Housing Enterprise Oversight (OFHEO) set the criteria on what defines a conforming loan limit that Fannie Mae and Freddie Mac can buy. A loan that does not meet guidelines is a non-conforming loan.
Criteria include debt-to-income ratio limits and documentation requirements. The maximum loan amount is set based on the October-to-October changes in median home price. When a loan amount exceeds the guideline limits it is considered a jumbo loan. Jumbo loans typically have higher rates.
Fannie Mae and Freddie Mac only buy loans that are conforming. Those loans are repackaged into the secondary market, making the demand for a non-conforming loan much less. It is harder for lenders to sell these loans because of supply and demand, thus costing the consumer more to buy them.
Congress temporarily raised the loan limits in 2008 from $417,000 to $729,000. The limit was raised to help bring liquidity to the mortgage market after the sub-prime meltdown. Mortgage bankers, Realtors and home builders have been pushing for an extension, but no such luck.
What does all this mean? According to mortgage expert Mark Hanson, “The realists note that within certain mid-to-high end communities, which can underpin an entire county’s economy, the majority of houses and borrowers could be impacted, again weakening the macroeconomic foundation”.
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me is zombie me no care about loans